"Whenever Baelkhor hits an opponent, he may pay 2 life to seal the opponents attack after the Strike (it is removed from the game and doesn't go to the opponents Gauge)."

Zoey has the following text.

"After: If your attack hit, you may add the top card of your Discard to your Gauge and return your attack to your hand."

I would like an official ruling from Lvl99Games, but I think both happens. If Baelkhor hits, at the Hit step he pays 2 life to seal the opponents attack - but the sealing effect only happens after the Strike (even though the effect text is resolved at the hit step). Because Zoey's is an After effect, you can instead put the top card of your deck in your Gauge and return the attack to your hand. But then after the Strike is complete, the attack in Zoey's hand is sealed and removed from the game.

This is interesting, because Zoey cannot completely avoid Baelkhor's ability but can mitigate it by still getting Gauge for landing attacks. I have played this matchup before. But this rules question was not as apparent in that match because the situation did not arise. It was rare to trade Strikes, often a player was stunned or missed.

That's how we ruled it as well, but Brad has stated in the Eva thread that when she returns a continuous boost to hand it's "not in play" anymore. That implies cards have no memory.

It would just be pretty rough if Zoey's ability literally trumped Baelkhor's, so we ruled it partially for balance. To exactly your point, Zoey still gets value by using her ability, even if the card gets sealed out of her hand rather than out of gauge.

Ooh, I missed that Eva ruling. That might be a consistent way to avoid rules confusion in the future. But the big difference here I guess is Eva's ability targets boosts, where Zoey's and Baelkhor's target attacks. I personally think the timing on these abilities is on purpose to allow for these kinds of interactions.

Having slept on it I know now why this never came up in my games, it is a timing thing. If Zoey goes first, resolves her After effect, and stuns Baelkhor, then Baelkhor does not even get a chance to do his effect. If Baelkhor hits first, resolves his Hit effect, then stuns Zoey, then same deal.